Trade facilitation and paperless trade implementation in Latin America and the Caribbean: Regional Report 2017

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V. Conclusions and way forward For Latin America and the Caribbean, making progress in the trade facilitation agenda is important for several reasons. By easing trade among countries of the region, it can help to raise its low level of intraregional trade, which currently stands at just 16% of the region’s total exports. Since red tape at the border affects SMEs disproportionately, trade facilitation also encourages the internationalization of such firms, the overwhelming majority of which do not export in the Latin American case. 20 This may in turn promote export diversification, thus helping to reduce the very high concentration in commodities that characterizes the export baskets of many countries in the region (particularly in South America). The expeditious movement of goods across borders is critical for the success of international production networks. Hence progress in trade facilitation may help to increase the presence of Latin America and the Caribbean in regional and global value chains, which –with some exceptions- is currently very limited. At a more general level, several of the concepts embodied in the trade facilitation agenda (for example, increasing the transparency, efficiency and accountability of public agencies) are important to reform the State and to fight corruption. The results of the Global Survey 2017 indicate that Latin America and the Caribbean as a whole has made considerable progress in implementing trade facilitation measures. However, progress is uneven across countries and subregions. All participating South American countries, as well as Mexico, Costa Rica and the Dominican Republic, perform above the regional average. By contrast, several participating countries from Central America and especially the Caribbean obtained below-average scores. These results suggest that international cooperation efforts, for example through the WTO’s Trade Facilitation Agreement Facility, should especially (although not exclusively) target this second group of countries. The group of 21 participating countries presents average implementation rates above 80% in more than half of the core trade facilitation measures included in the Global Survey. These include prearrival processing, the establishment of independent appeal mechanisms for Customs decisions, the acceptance of paper or electronic copies of required documents, the separation of release from the final determination of Customs duties, provisions for expedited shipments, the electronic submission of sea and cargo manifests, and the use of risk management, among others. Moreover, all participating countries except Antigua and Barbuda have electronic/automated Customs systems fully in place. Other important measures have implementation rates in the 70% to 79% range, such as e-payment of Customs duties and fees, availability of advance rulings, trade facilitation measures for authorized operators, establishment of National Trade Facilitation Committees and electronic application and issuance of import and export permits. At the other end, some of the measures with the lowest implementation rates relate to paperless trade (both internal and cross-border): the electronic exchange of certificates of origin (38%) and of sanitary and phytosanitary certificates (19%), and the electronic application for Customs refunds (29%). This is not surprising, since these measures require the support of a sophisticated ICT infrastructure and –in the case of cross-border measures- close cooperation between the relevant agencies of the countries exchanging information. Some other measures with low implementation rates 20 Low SME internationalization in the region is a consequence of multiple factors, including informality and limited access to credit, technology and the best management practices, among others. Therefore, while trade facilitation helps internationalization by reducing administrative barriers to trade, other public policies are also required. 51
do not appear to require big financial investments, such as the publication of average release times for import shipments (43%) or border agencies delegating controls to Customs authorities (22%). In these cases, limiting factors could be mainly of a political or institutional nature (i.e. trade facilitation is not seen as a political priority, insufficient inter-agency coordination, or resistance by Customs or other agencies to increased accountability and transparency in their daily work). The region also scores low on ensuring that SMEs and especially women involved in trade can make the most of trade facilitation measures. These are two areas where international cooperation could make an especially valuable contribution. The considerable progress made by most participating countries in implementing trade facilitation measures at the national level would have a greater impact on trade flows and production integration if such advances are coordinated at the regional or subregional level. Central America is a good example, as shown by its positive experience using CAUCA, TIM and other common trade facilitation instruments. More recently, there have been some encouraging developments in other parts of the region. In particular, the Pacific Alliance has made great strides in the area of trade facilitation, including the electronic exchange of origin and phytosanitary certificates among its members and ongoing work towards mutual recognition of their respective authorized operator schemes. Moreover, in April 2017 the members of the Pacific Alliance and Mercosur (Latin America’s two largest economic integration mechanisms) agreed on a roadmap for further cooperation, including several trade facilitation-related topics such as digital certification of origin, customs cooperation and interconnection of electronic single windows. 21 The initiative on digital certification of origin being carried out in the context of the Latin American Integration Association (ALADI) also holds great promise in this regard. Country respondents identified limited human resource capacity and lack of coordination between government agencies as two of the three most important challenges faced by their countries in implementing trade facilitation measures. These results suggest that technical assistance and capacity building are needed as much as financial assistance to implement certain measures. Survey results also highlight the institutional challenges associated to the trade facilitation agenda. In this context, careful design of National Trade Facilitation Committees will be crucial to secure political will at the highest level and to achieve effective public-private coordination. Regular monitoring and evaluation of these Committees is also advised in order to introduce necessary adjustments as countries start implementing the TFA and continue introducing other trade facilitation reforms. Finally, another key challenge for the region is to produce more studies quantifying the benefits of implementing trade facilitation measures. This would greatly contribute to buy-in for the trade facilitation agenda among policymakers. 22 21 See http://www.mrecic.gov.ar/en/meeting-foreign-ministers-mercosur-pacific-alliance-joint-communique. 22 ECLAC (2017) is an effort in this direction. Using a computable general equilibrium model, this study estimates the expected impact of an ongoing Customs cooperation program between Guatemala and Honduras (including integrated border crossings). This ex-ante impact assessment concluded that both countries’ GDP would grow by up to 0.4% and 0.7%, respectively. 52
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Trade facilitation and paperless trade implementation in Latin America and the Caribbean: Regional Report 2017

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